Distribution Secrets for the Asking
From the outside, the world of distribution seems pretty easy and mundane. One Internet “expert” summarized the key to success in our business as product, pricing and promotion. I couldn’t help but laugh as I read his summary. As a matter of fact, I suspect the author hasn’t spent 10 minutes in our business. Distribution is a game of incremental gains, process improvements that yield small advances here and there, throughout the business. Some seemingly great ideas work, while others don’t fare so well. But in order to remain strong in our business, we need a steady stream of ideas for improvement.
Over the course of my nearly three decades in distribution, I have discovered a good many “secret sources” of thought-stimulating and competitive ideas. Once again demonstrating that I am both white-haired and long in the tooth, some of these have shifted delivery mechanism from paper and press clipping services to the Internet and all the wonders of electronic media. I would like to invite you to take a four-minute tour of the free mechanisms for keeping your business driving ahead. We’re going to start with the quick and easy technology-driven things, then turn to some tried and true methods shared by other distributors.
Do you know what your competitors and supply partners are up to?
Ever wanted to keep track of a major supply partner or competitor? Back in the old days, this was pretty hard. Now, thanks to a service provided by Google, you can actively monitor their ever-public announcement. Messaging from their corporate leadership to trade associations, press releases, new changes on their website, product releases, new products and hiring announcements are all available without much effort through Google Alerts (https://www.google.com/alerts).
Here’s how it works. Enter the name of a company or person along with your email address, and any time the search topic is added to the Internet, you get an email with the updated information.
How might this information help you? Recently, one of my clients discovered a major cross-state competitor was planning an expansion in their area. There had been very few rumblings in the market and nothing on the “rep grapevine,” but one day an alert showed up in their mailbox announcing the company’s dealings with a local zoning board to get permission to build a new facility. This little piece of information gave my client an 18-month head start in preparing for a new competitor.
Google Alerts work for customers, too. Imagine being able to track important customer announcements. When the media, for example the trade press or a local newspaper, quote a customer, you’ll find it on the Internet and are aware of the posting because of the alert you established. The next day, you receive an email with the information. Think of the strategic and emotional benefits of quickly congratulating the customer. Further, customers frequently announce plans for expansions, new members of their organization and other information valuable to the selling effort.
Improving your team for next to nothing …
In our business model, something like 60 percent of our gross margin goes toward the salaries and benefits of our people. This number reinforces the old adage, “people are our greatest asset.” Yet, according to research conducted by Jonathan Bein, Ph.D., of Real Results Marketing, only 22 percent of distributors have a learning management system. Sadly, distributors struggle to fund skills-based training for their organization during tough times.
This will sound strange coming from a guy who offers training for a fee, but I would much rather see distributors spend 20 minutes a week reinforcing sales or leadership training than putting their teams through a two-day session without follow-up. Training can be part of your culture for next to nothing.
Sales meetings with selling skills content can be part of your culture. Every month, hundreds of great ideas are published in trade publications and in online blogs. While it might seem self-serving to mention, this publication has hit on some very strong topics for sellers. For instance, in the October issue of this magazine, I suggested a few points to discuss with your team:
• Does everyone in your organization understand that distribution is a 2 to 3 percent industry and appreciate the ramifications of the distributor model?
• Do your salespeople comprehend the cost of passing on “good buddy” pricing without understanding the impact of margin on the bottom line?
• Do your sellers understand that you need to offset special orders with massive administrative costs and incoming freight with higher gross margins?
• Does your team understand how much it costs to process an order?
While these points are not sales skill specific, they do make for a great 20-minute discussion between sellers and their leadership team. And I can pretty much promise the discussion will pay dividends in increased gross margins.
Leadership development has a massive impact. In a recent conversation with Jeffrey Stevens, vice president of sales and marketing at Elkhart, Ind.-based Mid-City Supply Co., I learned of their management team’s “book club.” Each quarter, the team reads a book covering new thoughts in management and leadership. At a formal meeting, the group shares their thoughts on the book and how the ideas might apply to their business. Currently, the group is going through Decide: Work Smarter, Reduce Your Stress, and Lead by Example by noted author Steve McClatchy.
Staying with the topic of leadership development, Dan Lauterhahn, senior vice president of sales at Kennesaw, Ga.,-based Packard Inc., recently shared his thoughts on industry leadership. “Our management team searches for ideas from outside of our industry and models Packard after world-class leaders in other industries,” Lauterhahn said. “For instance, the customer services provided by Nordstrom are viewed by most as the finest in the world. Why not ask how we could be the Nordstrom of the HVACR world?”
The power of 20 outside advisers …
Way back in 1937, Napoleon Hill literally created a new industry by authoring the first business self-help book, called Think and Grow Rich. Hill laid out the premise of the Master Mind, a group of like-minded individuals who help one another reach their goals and objectives. One might wonder if the premise works in the post-modern Internet age. Today, organizations like Vistage Worldwide organize facilitated CEO peer-group round tables to drive this idea forward. However, while you can learn much from the leaders of other main-street businesses, I believe our industry is unique enough to warrant a different approach. Would it make better sense to share ideas with those who live in the world of HVACR distribution?
We recently spoke to Lauren Roberts, vice president at Kansas City-based cfm Distributors Inc., and she shared an incredible story that needs repeating:
“I remember my first HARDI meeting, which was a HARDI Focus Conference,” Roberts said. “Somewhere early in the event, I realized I only knew two people. I wanted to be engaged, I wanted to be more than just a casual ‘attendee,’ but I found it difficult to engage with 100-plus people at the same time, so I joined the marketing committee. My network took a big jump forward. When the Emerging Leaders Group was launched, I decided to take an active role there as well. Today, I regularly exchange ideas with 30 to 40 people in our industry on a regular basis. The amount of great ideas that have come to cfm Distributors through the people on the marketing committee and in the Emerging Leaders group is incredible. I can’t emphasize the importance of joining a HARDI committee or council enough. It takes the HARDI experience to a whole different level and has drastically increased the ROI I receive on attending HARDI events.”
Lauren wasn’t the only distributor we spoke with who felt networking was their secret weapon.
Jeffrey Stevens of Elkhart, Ind.-based Mid-City Supply felt as though the formal best practice networks conducted by his buying group provided valuable insight. “Product knowledge can be taught to anyone that is willing and capable of learning,” Stevens said. “I meet twice a year with a best practices network within our buying group and always find the ideas shared valuable. I can’t remember a single session where we didn’t have more ideas than we could implement. And sometimes this group helps us avoid pitfalls we would otherwise have learned the hard way.”
After a 40-minute conversation, we asked Packard’s Dan Lauterhahn to summarize his very best source of distribution ideas. He didn’t hesitate. “Hands down, the best source of information comes from fellow HARDI members,” Lauterhahn said. “As the co-chair of the Emerging Leaders group, I get a fresh perspective from some of the next generation of HARDI executives, some real good stuff. But I also get balanced perspective from some of the senior guys in our industry. People with busy schedules and companies to run are willing to take the time to share openly from their years of experience.”
OK, now what?
Going back to comments shared by these and dozens more leaders in our industry, finding good ideas is only half the battle. Implementation is the key. Unfortunately, most of us have daily responsibilities, meetings, customer and supplier issues and dozens of other distractions. However, creating a list of just a couple worthy ideas to implement can often be done in a matter of minutes. For instance, the Google Alerts idea took one of my clients just 10 minutes to set up, and three weeks later, they have already discovered an opportunity worth tens of thousands of dollars. Reaching out to others via phone is something that you can easily accomplish while commuting from customer locations to your office.
One final point. HARDI meetings and other industry events are powerful networking opportunities. Before your next gathering, review the attendee lists for companies you respect and take the time to meet some of the people. Don’t fill your time with idle chitchat. Instead, think of a few problems in your own organization and ask if the other company ever experienced anything similar.